Liston on Raptors: Building it right

Is Raptors guard DeMar DeRozan a building block or a stumbling block? (The Canadian Press)

There’s no question that the processes of building a winning professional sports team and a world class company have their differences, however, they do share common traits as well.

As an equity research analyst for 14 years, I’ve seen my share of highly-successful companies.

What are the common links between them?

1. A Clear Vision

Successful companies set out a clear vision for their stakeholders (board of directors, management, employees, partners, clients and owners). From the board to management to the employees, everyone is on the same page.  Importantly, the company’s vision is based on an understanding of how the company will be differentiated in order to meet its goal.

2. Consistent Strategy and Patience

Management delivers a consistent strategy framework for its employees.  Team members understand the necessary steps to make the organization successful, and how their company is unique.

3. Embracing Innovation / Differentiation

In most industries, there are often a number of large, established incumbents. Size, scale, locations and its attractiveness to employees will keep these companies at the top. Thus, new entrants need to differentiate themselves. Embracing innovation is key. Mimicking the strategy of the established firms will ensure new entrants will not gain share.

How are these themes applicable to a NBA franchise like the Raptors?

1. A Clear Vision

The organization has not had a clear and consistent vision in several years – perhaps over its existence. Specifically, the organization has to get off the treadmill of building a mid-tier team, without enough talented youth to take it to the next level.

Importantly, what is a Raptors team known for? Slam dunk contest entrants come to mind as the only item with some consistency over the years. Is the vision to build a run-and-gun team (DeMar DeRozan, Kyle Lowry, Terrence Ross)? A team around a specific offensive philosophy (Andrea Bargnani, Rudy Gay)? A tough defence-first philosophy (Coach Dwane Casey, Amir Johnson, Landry Fields)? Having a common thread among player acquisition is key. Hiring Casey without adding top defensive players isn’t congruent.  Acquiring Lowry without a wing that can hit a corner three also isn’t consistent with a clear framework.

Another idea: Have a basketball-specific (as well as hockey and soccer, in MLSE’s case) Board of Directors/Advisors under the main MLSE Board.  It can be a small board, but ensure it includes basketball-specific individuals. Attempt to have some diversity among individuals with NBA experience, international experience and potentially perspective from the Toronto business/fan community. The Raptors have this in some respects with individuals like Wayne Embry, but adding structure to the decision-making – with basketball-specific experience – can only help.

2. Consistent strategy and patience

In the NBA, a .500 team is the worst place to be – unless the team is young and one veteran addition could push it into the upper tier.

The Raptors’ moves have generally enabled them to contend for a playoff spot, but have always handcuffed them from moving toward being a top-tier firm. The veteran additions have caused salary-cap-flexibility issues without giving the team an opportunity at a multi-series playoff run. As well, a middle of the pack team will rarely be able to obtain a franchise player via the draft.

Instead, the team needs to stockpile picks and young assets and build toward a time when those assets hit their peeks (in the 25-to-30-year-old age range). Only then do you add the veteran or two to the mix. Having a consistent strategy (and patience) is common among “have-not” franchises like San Antonio, Indiana, and Memphis. Sportsnet’s Michael Grange already suggested a path much like the latter two.

When we ran the data for lineups used by Indiana and Memphis, it showed that these teams kept their core players on the floor together at the highest rates over the last number of years. Certainly consistency – familiarly – has some impact on their success.

3. Embrace Innovation

Toronto isn’t Boston, Los Angeles, New York or Miami, thus, the organization should generally avoid trying to mimic the “attract the superstars” focus.
One, those markets, given their history and/or marketing clout, will win most pricing contests.

Secondly, a team can give up too much in return. Toronto has a couple of things going for it:  1) it remains a big market and a world-class city, 2) Its fan base embraces “real”. The appeal to the not-over-marketed player who’s overly productive is significant. This fan base understands (well, perhaps not initially) how critical Amir Johnson is to winning basketball games. It embraces the “team-first” player. It understands how diving for a loose ball when down 10 with two minutes to go impacts team culture. Whatever the sport, Toronto fans love the grinder. Thus, not only are these players often better value than say low-efficiency volume chuckers scorers, but they will fill the seats, as well.

Thirdly, trying to run the same systems with less-talented players will not get a team very far; however, leveraging leading-edge innovation could. For example, the Raptors’ analytics team is at the forefront of the field.

If the team finds patterns that are not exploited by others, then absolutely you need to develop that competitive advantage.  Not only with your own personnel, but via trades, signing free agents, and the draft – take advantage of the value others do not see, particularly when the players fit into the analytics-derived alterations to the sets. As I noted in a previous post:

It takes courage as job security is on the line but not to embrace and run with a clear competitive advantage would be disappointing. Leading a new era of basketball intelligence and winning more basketball games is something I strongly endorse.

The New Era

New MLSE CEO Tim Leiweke has a resume that suggests he has a history of delivering a clear vision and executing against; however, Los Angeles certainly has some key advantages over Toronto.  Thus, the differentiation plan will have to be tweaked.  The vision is bold – setting the bar high, at a championship-calibre team. He’s changed the framework.  Now it’s about execution.

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